Finances

Walt Disney’s Earnings Impress Investors

The Walt Disney Company (DIS), an international entertainment company, reported its latest quarterly earnings on Tuesday, August 5. The company’s Studio Entertainment segment reported an increase in revenue year-over-year of 14% leading to the highest quarterly earnings per share in the company’s history.

Disney reported quarterly revenue of $12.47 billion. This represents an increase of 7.67% from the same period last year when the company reported revenue of $11.58 billion.

“Our strategy of building strong brands and franchises continues to create great value across our company,” said Robert A. Iger, Chairman and CEO of The Walt Disney Company. “This quarter we delivered the highest EPS in the company’s history, and we’ve now generated greater EPS in the first three quarters of FY 2014 than we have in any previous full fiscal year. We’re extremely pleased with these results and we are also thrilled with the spectacular performance of Guardians of the Galaxy, which holds great promise as a new franchise for our company and once again reinforces the tremendous value of Marvel.”

The company reported net income of $2.25 billion for the quarter. This represents an increase of 21.55% from the comparable quarter last year when the company reported net income of $1.85 billion. Earnings per share came in at $1.28 per share compared to $1.01 per share during the same period last year.

Disney’s Studio Entertainment segment announced impressive results this quarter. In particular, Disney’s acquisition of Marvel Studios in 2009 has been wildly successful for the company. Marvel Studio’s latest release, Guardians of the Galaxy, earned $94 million at the box office during its opening weekend. Other recently released films under the Disney umbrella brand include: Frozen, Captain America: the Winter Soldier and Thor: the Dark World. Releases planned for the upcoming year include: Captain America 3, Avengers: Age of Ultron and Ant-Man.

The Walt Disney Company (DIS) shares ended the week at $86.85, up 0.79% for the week ending 8/8.

Twenty-First Century Fox Reports Earnings

Twenty-First Century Fox (FOXA), an entertainment company, announced its latest quarterly and fiscal year earnings on Wednesday, August 6. The company reported better-than-expected fourth quarter profit.

The company reported quarterly revenue of $8.42 billion and annual revenue of $31.87 billion. This represents an increase from the same periods last year when the company reported revenue of $7.21 billion and $27.68 billion, respectively.

“In the fiscal fourth quarter we built on our operational momentum with double digit earnings and revenue gains,” said Chairman and CEO of 21st Century Fox, Rupert Murdoch. “The Company’s strong financial performance was driven by sustained affiliate revenue increases at our cable networks and record fourth quarter contributions at our filmed entertainment segment on the strength of global box office successes X-Men: Days of Future Past, Rio 2 and The Fault in Our Stars. As we close the fiscal year, I continue to have confidence in our ability to execute our growth plan and drive value for our shareholders.”

The company reported net income of $999 million for the quarter and $4.51 billion for the year. Annual net income decreased compared to fiscal year 2013 when Fox reported net income of $7.1 billion. However, net income for the fourth quarter was significantly better than last year’s loss of $371 million.

Twenty-First Century Fox’s earnings announcement was slightly overshadowed by the news that it will no longer be in talks to purchase Time Warner. Three weeks ago, Time Warner revealed that it had received an unsolicited buyout offer from 21st Century Fox for $76 billion. Many viewed this as billionaire Rupert Murdoch’s latest attempt to expand his media empire. Time Warner owns Warner Brothers Studios and the TV channels TNT, TBS and HBO. The management team at Time Warner made it clear they would oppose the buyout. On Tuesday, both sides expressed that no deal would be reached.

21st Century Fox (FOXA) shares ended the week at $34.37, up 7.68% for the week ending 8/8.

Lions Gate Reports Quarterly Earnings

Lions Gate Entertainment Corp. (LGF), an entertainment company, reported its latest quarterly earnings on Thursday, August 7. Investors were impressed by the company’s earnings per share even though it had a lighter slate of movies this quarter.

The company reported revenue of $449.38 million for the quarter. This represents a decrease from the same period last year when the company reported revenue of $569.73 million.

“We’re pleased to report strong adjusted EBITDA, earnings and free cash flow generation in what is historically our lightest quarter of the year,” said Lionsgate CEO Jon Feltheimer. “During the quarter we deepened our portfolio of brands and franchises, extended our global reach and formed entrepreneurial partnerships with digital and traditional platforms alike as we used our strengths as an innovative pure play content company to position ourselves for continued growth and profitability in an increasingly dynamic industry environment.”

Lions Gate reported quarterly net income of $43.26 million. This represents an increase from the comparable period last year when the company reported net income of $13.62 million. Earnings per share came in at $0.31 per share compared to $0.10 per share during the same quarter last year.

In an interesting move, Lions Gate is in talks with theme-park partners on four different continents to build theme parks centered on its blockbuster franchise The Hunger Games. In addition to rides featuring bow-and-arrow wielding heroine, Katniss Everdeen, the company may also include rides and attractions for fans of the Twilight and Divergent series. Perhaps Lions Gate is taking a page out of Disney’s book. Disney collects about 30% of its revenue from its parks versus 15% from its movies. Lions Gate may be looking for a similar stable income generator.

The Dow started the week of 8/4 at 16,494 and closed at 16,554 on 8/8. The S&P 500 started the week at 1,927 and closed at 1,932. The NASDAQ started the week at 4,366 and closed at 4,371.

Treasuries Rise in Geopolitical Climate

Treasury prices rose and yields fell this week as turmoil in the Middle East drove investors to the safety of government bonds. In fact, sovereign securities advanced across the globe as geopolitical conditions in the Middle East, Ukraine and Russia continue to cause investors to be cautious.

This geopolitical unrest has caused investors to flee from more speculative positions to the safety of government bonds. The U.S. 10-year Treasury note yield fell as many as six basis points to 2.35%, rebounding to 2.39% during Friday morning trading. The U.S. 30-year bond yield dropped as low as 3.18% before rising to 3.21%. Both the 10-year and 30-year bonds dropped to their lowest levels since June 2013.

German and Australian bonds also dropped during trading this week. The German 10-year note yield dropped as much as four basis points to a record low of 1.023% before rising to 1.05%. The Australian 10-year note yield dropped as much as14 basis points to 3.28%, its lowest level since June 2013.

“People are hiding in Treasuries,” said Charles Comiskey, Head of Treasury Trading at Bank of Nova Scotia. “It’s a huge flight to quality. There’s a lot of confusion in the world.”

The 10-year Treasury note yield finished the week of 8/4 at 2.42% while the 30-year Treasury note yield finished the week at 3.23%.

Interest Rates Increase

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, August 7. The results show average fixed mortgage rates moving upward from their lowest level this year.

The 30-year fixed rate mortgage averaged 4.14% this week. This represents an increase from last week when it averaged 4.12%. One year ago at this time the 30-year fixed rate mortgage averaged 4.4%.

This week, the 15-year fixed rate mortgage averaged 3.27%. This represents an increase from last week when it averaged 3.23%. Last year, the 15-year fixed rate mortgage averaged 3.43%.

"Mortgage rates were little changed amid a week of light economic reports,” said Frank Nothaft, Vice President and Chief Economist at Freddie Mac. “Of the few releases, ISM non-manufacturing index rose to 58.7 in July from 56.0 a month earlier. Also, factory orders were up 1.1% in June. The two reports signal steady economic growth in the third quarter of the year."

The money market fund finished the week of 8/4 at 0.4%. The 1-year CD finished at 0.6%.